The Supreme Court has issued its decision in Cooper v Pinney [2024] NZSC 181, clarifying the position it set out in Clayton v Clayton about trustee powers and relationship property. Specifically, Cooper v Pinney provides more detail about how to determine whether the powers or rights in respect of a family trust should be considered to be property rights falling within the ambit of the Property (Relationships) Act (PRA).
The trust deed in question in this case contained some significant differences from the deed in Clayton v Clayton, where the trustees’ powers were considered to be property as they gave the holder control tantamount to ownership of the assets of the trust. The key differences in the trust deeds were:
- A minimum of two trustees were required, so that Mr Pinney could not be a sole trustee as Mr Clayton was.
- The trustees must act independently, in the interests of the beneficiaries, and not under the delegation or direction of another, preventing Mr Pinney from having sole control of the trust.
- The power to appoint trustees, held by Mr Pinney, is itself a fiduciary power, and constrained by fiduciary obligations. It therefore must be exercised in good faith and in the interests of the beneficiaries, and not for any improper purpose.
- If Mr Pinney was a trustee, he would be permitted to act for self-benefit, but would still have an obligation to deal with the other beneficiaries in good faith – Mr Clayton’s trust specifically removed the requirement to consider other beneficiaries.
- This trust did not confer a power to remove all beneficiaries, unlike the power held by Mr Clayton.
Based on the above, the Supreme Court decided that the combination of powers reserved to Mr Pinney was significantly different to those reserved to Mr Clayton, and in this case a “power analogous to a general power of appointment is not created”. It followed that there was no bundle of powers that could be considered property in this case.
What does this mean?
Clayton was very much the high water mark of cases on trusts and relationship property. Although similar trusts would be dealt with in the same way, most trusts are more similar to the trust in this decision – at least two trustees required, beneficiaries cannot be easily removed as a beneficiary, etc. This decision provides confirmation that for these types of trusts, the powers will not be sufficient to amount to property under the PRA.
If you have any questions, or would like to discuss what this means for you, please get in touch with a member of our Trust team.
Disclaimer: The content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.
